Although Google always seems to be up to something, the past few months have seen a flurry of activity in a space long associated with IT: Google has driven its cloud computing applications -- Google Apps -- into businesses.

Now Google wants to move up market and become an enterprise player. For example, it has announced enterprise editions of its Google Apps, and has 600 employees across sales, support, engineering, marketing, and product management dedicated to enterprise products at Google.

But the road to the enterprise is fraught with pitfalls. Big companies are infamous for long software sales cycles and averse to newfangled technology such as cloud computing. Requirements run the gamut, from security to compliance, manageability to support. And, of course, Google is on a collision course with Microsoft in the cloud.

The one sure bet: Despite Google's recent rush to bring new products and functionality up market, "Google Apps has a long way to go," says Phil Shih, analyst with Tier 1 Research. "I don't see them being anywhere near enterprise-ready."

Google Apps is a bunch of free software with very limited functionality hosted at Google's datacenters and accessible over the Internet. The suite includes Gmail, which receives revenue from advertising; Google Calendar, which lets users share a calendar; Google Talk, for free text and voice calling; and Google Docs, for document creation and collaboration.

Many consider Web-based Google Apps to be a challenge to Microsoft Office on the desktop, although market comparisons today are hardly fair. Google claims more than 500,000 companies have signed up for Google Apps, but Gartner analyst Tom Austin figures only a handful of employees at each company uses the tools. Given Microsoft Office's 500 million users, he says, "it's a raindrop."

Google enters the business worldFour years ago, Google began riding the cloud computing wave into the backwaters of businesses by offering a piece of its heralded search-engine technology for corporate Web sites. The success of that product showed Google that it could make a splash in businesses, and thus Google rapidly expanded a business line of plain-Jane software services.

Google Apps has held a kind of grassroots appeal for workers fed up with their IT department's sluggish responses to their requests. These workers wanted to tap free collaboration applications over the Internet, while skirting draconian IT policies. Indeed, employees across the board have been taking control of IT.

Thus, Google has enjoyed a surge, mostly within small and midsized companies. As Google Apps took hold inside cubicles, CTOs had to find ways to support the software or else ban it. Gartner's Austin says last year he fielded a rising tide of telephone calls from clients wanting to know more about Google Apps. According to TechCrunch, Google Apps earned about $400 million in 2007.

Google, too, saw the signs and ramped up efforts to make Google Apps more business-friendly. In summer 2007, Google bought Postini for $625 million -- the company's third-largest acquisition. Postini brings policy, security, and compliance rules to e-mail and the Web, a critical feature for large companies looking to leverage cloud-based computing applications. "We've taken a lot of [Postini's] functionality and integrated it with Google Apps over the last six months," says Rajen Sheth, senior product manager for Google Apps.

Earlier this year, Google's pitch hit a crescendo. It came out with a host of new products: Google Web Security for Enterprise, which uses Postini technology, and Google Sites for people to create a "team" Web site. Most notably, in late February, Google announced Google Apps Team Edition, which aims to give administrators visibility into Google Apps usage at their companies, as well as the ability to exert some control -- a sure sign that Google wanted to court big companies.

Microsoft chills out the cloud noiseThe reaction from Redmond was swift. Less than a week after the Google Apps Team Edition announcement, Microsoft announced the public availability of Microsoft Office Live Workspace beta. Microsoft describes this as a Web-based extension of Microsoft Office that lets people access their documents online and share their work with others.

Unlike Google Apps that actually run in the cloud, Microsoft Office Live Workspace requires Microsoft Office applications to run on a person's computer in order to create documents and make changes to them in the online workspaces. Randall Kennedy, an InfoWorld Test Center contributor and longtime Windows performance expert, panned Microsoft Office Live Workspaces in a December review, citing its lackluster document-sharing features and its tardiness to the cloud computing party.

In addition to the Microsoft Office Live Workspace announcement, Microsoft revealed plans to release Microsoft SharePoint Online and Exchange Online in the coming months as a paid subscription service. Basically, companies can choose to have Microsoft host SharePoint and Exchange instead of hosting it themselves on their own servers. Much like Google Apps' online collaboration draw, Microsoft's new services will let business users access e-mail, calendars, contacts, shared workspaces, and videoconferencing over the Web.

The Microsoft announcement was a tactical move. "Microsoft is telling companies that they're coming to market, so wait before making decisions about cloud-computing services," Austin says. "This is a great market freezer."

Microsoft believes the hosted services model will eventually play a major role at large corporations. "In five years, we think closer to 50 percent of Microsoft Office users will be using Microsoft [online] services, likely in conjunction with Microsoft software," says Alex Payne, director of product management in the Microsoft Office group. The difference: Microsoft is looking to add online capabilities to Office, not move Office online. Google wants to cut into Office with online services of its own.

The long road to the enterpriseGoogle claims its efforts to crack large enterprises, including forging a partnership with Salesforce.com in April, are paying off. "We are working with three to four dozen large-size enterprises in various stages of deployment right now of Google Apps," Google's Sheth says. "Some of them, such as Genentech, have announced they'll be doing larger deployments."

In a single week in June, Gartner analyst Austin had three inquiries from companies -- "each with tens of thousands or more users," he says -- asking about using Google Apps in the next year or two. The timing is somewhat surprising since most large companies upgrade e-mail and collaboration applications on a minimum 10-year cycle. "That argues against any quick success for Google," Austin says.

The three companies were not seeking full deployments, either. "They wanted to know about segmented strategies for a certain class of employee, such as a highly mobile person who doesn't really need a laptop but has to access e-mail and corporate information," Austin says. "They asked, 'What about cloud computing? What about Google?'"

And herein lies the rub. Although Google Apps may carve out niches, it's unlikely that basic applications in the cloud will play a major role in the way giants of industry conduct business. Imagine sensitive business documents being shared in the cloud without comprehensive enterprise controls.

Not only is Google Apps not ready, says Tier 1's Shih, companies aren't either. "The general trend toward more applications, more collaboration being done online in the work environment, is pretty irreversible," he says. "But enterprises making the leap from the desktop to the cloud is still a bit of a stretch right now."